Picture source: ThinkStockHindustan Unilever Ltd (HUL) posted a 7% rise in March quarter sales thanks to a revival in consumption after the demonetisation-induced dip, sending the country’s biggest consumer goods company’s shares to a record high on the Bombay Stock Exchange.

The company, a good proxy for consumer sentiment, said market stability had increased and consumer confidence had risen.

“It’s a broad-based growth. Wholesale trade hasn't really gone back to the pre-demonetisation level. It will take at least a quarter or more post GST (goods and services tax) for it to stabilise,” said HUL managing director Sanjiv Mehta, adding that rural demand is still growing more slowly than urban.

“A couple of years back, rural was growing twice the rate of urban and we expect that rural should go back to those growth rates.” HUL’s stock rose 0.82% to close at Rs 1,006.35 on Wednesday. GST is expected to be rolled out on July 1.

In the past few years, drought and lower minimum support prices for farm produce have hit rural demand.

The company, however, said the premium secular trend in urban markets remained strong, helping it to overtake peers. The maker of Rin detergent and Lux soap saw volume growth increase 4% in the fourth quarter ended March.

Profit before exceptional items increased 8% to Rs 1,118 crore at the Indian unit of Anglo-Dutch Unilever with operating profit margins, before interest and tax, up 90 basis points. A basis point is 0.01percentage point.

The cost of goods sold during the period was 20 basis points lower than in the year-ago period as prices of crude and palm oil, key raw materials for soaps and detergents, moderated. Earnings were ahead of peers such as Colgate Palmolive and Dabur.

“There is a strong recovery from last quarter with margins improving in most categories,” said Abneesh Roy, senior vice president at Edelweiss Securities said.

HUL’s personal care business, which accounts for half its overall sales, rose 8% to Rs 4,075 crore in the March quarter while the homecare segment grew 8% to Rs 3,004 crore.

While there will be some destocking of products in the trade due to the imposition of GST, HUL said the thinning of the trade pipeline will be temporary. “It should not impact to a large extent, the consumer offtake,” added Mehta.

Although other factors — such as a continuing demand slowdown, especially in rural markets, and price hikes in a few categories — have also influenced sales growth, one variable in the past two quarters was demonetisation, which was announced on November 8 last year.

Consumer demand peaked in the March quarter, recording the highest sales growth in daily groceries, and home and personal products in the last two years, a Nielsen report indicated.

The recovery followed a quarter of muted sales due to the currency swap in November that had curtailed the purchasing power of rural households using cash to buy shampoos, soaps, or packaged cookies. While listed companies have been posting lower value growth numbers, Nielsen said the market’s expansion has been fuelled by smaller companies.

With homegrown rival Patanjali’s meteoric rise to a Rs 10,000 crore company in less than a decade, several multinationals are also focusing on the ayurveda sector. HUL, which launched Lever Ayush last year, plans to launch Citra, an organic skincare brand from Indonesia.